With the prices in the broad markets at all time highs, questions are being raised about whether this is the right time to be buying S&P 500 ETF: SPY. Every trader should always be looking for a great deal, they never want to overpay nor do they want to be on the wrong side of the trade.
[Editor’s note: Sarah Potter’s new book: How You Can Trade Like A Pro is available at Amazon and bookstores March 28.]
So the question becomes, when this index is making all time highs, how do traders look for opportunities to buy SPY?
All markets follow a natural trend, and respect moving averages. It is in the moving averages that provide insights in to opportunities to get in and out of trades. For those traders holding on to longer term positions, taking advantage of this week’s correction might just be that opportunity to get in.
KEY LEVELS
With price of SPY currently trading around 186, I will be looking to pick up some long calls by buying the 184 calls. As you can see on this weekly chart, there is support at the 183 level.
Multiple levels of support from the weekly and daily chart of the SPY and the ES confirm that price may just be pulling back slightly allowing for a good buying opportunity. Looking back at this weekly chart confirms that price has pulled back at times, but then continues to resume making new highs. My expectation is that SPY has entered a period of a slight pull back, but will once again continuing this long trend.
MY TRADE IDEA
Using an option that expires at the end of this month, I like the idea of buying the 184 call with the goal of selling them when price resumes its highs.
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Potter trades options live with her members every Tuesday and Wednesday. Members watch her analyze the markets, share trading ideas and trades live. For a limited time, you can try out the cornerLOT for only $7 for a two week trial. For information e-mail sarah@shecantrade.com ]
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